As we enter the final months of 2020, it is time that employers should begin looking towards their 2020 ACA reporting requirements in 2021. The Affordable Care Act remains intact and employers will still need to adhere to the employer mandate.
Here is an overview of the reporting requirements that employers will need to know going into 2021 and while preparing the ACA reporting for the tax year 2020.
What are the requirements under the IRS Sections 6056 and 6055?
Under Section 6056, the IRS mandates that all applicable large employers, or ALEs must provide minimum essential coverage to their full-time employees.
Under Section 6055, in addition to providing minimum essential coverage, ALEs must report this information to the IRS and provide a copy of the information returns to their employees as well.
In addition to these large employers, insurance carriers employers who offer self-funded group health insurance, and any other health plan sponsors must report this information to the IRS.
Employers who fail to comply with these requirements will face an ESRP, employer-shared responsibility payment.
Who must file?
All applicable large employers (ALE) are required to file with both the IRS and supply their employees with recipient copies. An ALE is defined as having 50 or more full-time or full-time equivalent employees.
Any sponsor of health insurance coverage plans should participate in ACA reporting. Employers offering self-funded coverage to their employees should file as well.
What Forms must be filed?
ALEs must file the Form 1095-C with the IRS to report their employee-sponsored health insurance plan. The following information is central to completing the Form 1095-C.
When the offer of insurance was made to the employee
What the employees’ coverage status for each month of the year
Proof that the health insurance plan was affordable for the employee, possibly using Safe Harbor methods to calculate the affordability.
There are many ACA codes that are used in the Form 1095-C, specifically for lines 14 and 16. One of these sets of codes is used to indicate the health insurance status of each employee for each month of the year. On Line 16, employers must indicate the method they used for calculating the affordability using Safe Harbor codes.
Employers offering self-funded group health insurance along with insurance carriers and government entities must also fulfil their reporting responsibility.
This is done with the Form 1095-B. This form, while different from the 1095-C, reports similar information surrounding the covered individual. The deadlines are the same whether you are filing form 1095-B or 1095-C.
What are the changes for the 2020 tax year?
The most significant changes for tax year 2020 are related to the reporting of ICHRAs. Under the current administration, employers are able to offer their employees an Individual Coverage Health Reimbursement Arrangement as opposed to the traditional group health insurance plan.
This means that employees can choose their own health insurance coverage, on the Healthcare Marketplace, for example. The employer will then reimburse their employees with an allowance of tax-free money.
So, how does an employer report an ICHRA plan on the Form 1095-C? The revised draft of Form 1095-C has a line dedicated to this information. Line 17, Zip Code, must be completed by any employer that chooses to offer their employees an ICHRA. The IRS will use the employees’ zip code to ensure the affordability of the plan.
There is also a new series of codes to be entered on Line 14, Offer of Coverage, that refer specifically to the ICHRA.
When filing the Form 1095-B, the new code G must be entered on Line 8 to indicate an Individual Coverage HRA.
What are the 2021 deadlines?
There are a few main deadlines that employers must abide by to maintain their IRS compliance.
The first deadline is one that was just extended by the IRS, the recipient copy deadline. This deadline is now March 2, 2021.
The deadline for employers to mail paper copies of their Forms 1094-B/C and 1095-B/C to the IRS is February 28, 2021.
The deadline to file Forms 1095-B/C electronically with the IRS is March 31, 2021. Remember, if you are filing over 250 forms, you are required to file electronically!
Printing and mailing your recipient copies
Printing and distributing your recipient copies of 1095-B/C can be daunting to say the least, but not when you choose TaxBandits!
TaxBandits offers a print mail solution for your recipient copies. There is no need to spend unnecessary time at the post office this year, as we can handle mailing your copies. Plus, we ensure that your copies all go to an accurate address, by checking your employees’ addresses against the USPS database.
Ready to get started on your ACA reporting? The sooner you start, the less stress you will be under! Begin e-filing today with your free TaxBandits account.